October 21, 1999 2:00 PM PDT
Portal numbers are flat--where is everyone?
Noted Internet stock analyst Henry Blodget of Merrill Lynch made reference to the statistics, reported by Media Metrix, in an analyst note pointing out that the overall growth of U.S. Web users has tapered over the past three months. Until earlier this year, an average of 750,000 Americans became new Web users. In September, that number hit only 240,000.
"We don't want to make too much of this but we believe it may well be another sign of the flattening of growth of Web users in the U.S.," he wrote. "If so, it obviously has several implications for the Internet companies and stocks."
September was a lackluster month for Web growth, according to Web measurement firm Media Metrix, which measures how many users visit specific sites--and how often. The company measures "unique visitors," or the number of users who visit a Web site at least once a month; and "reach," or the percentage of the total U.S. Web population that visits a site.
Web heavyweights took hits to their numbers in September. AOL sites--which include the AOL.com portal, the Netscape Netcenter portal, the DigitalCity local network, women's site Electra.com, ICQ.com, and Entertainment Asylum--lost close to 2 percent of their traffic from the previous month.
Traffic to Microsoft sites--which include the MSN Web portal, MSNBC.com, Web-based email provider Hotmail, travel site Expedia, and local guide Sidewalk-- remained flat. And traffic to Yahoo dropped 4 percent.
Most industry analysts are not making a fuss over the figures. They said a decline over a month should not be considered a trend, and that Media Metrix's small sample size may not tell the whole story.
"We have a limited sample size, but it's the best we've got," said James Preissler, an equity analyst at PaineWebber. "But taking that data and making global calls off of that--I'd deem that somewhat challenging to do."
But Blodget, whose opinions carry tremendous weight among investors and other people in the industry, said that the numbers could have an impact on the growth of the Internet.
Blodget said that as the Internet industry matures, growth for new users, advertising dollars, and e-commerce dollars will begin to slow down.
Other analysts, although wary of the small sample size, attributed the slower growth to other factors. David Card, an analyst at Jupiter Communications, said seasonal usage patterns could be a reason for the decline. But if there were a trend taking away market share from portals, Card said, it could be blamed on "affinity portals"--Web aggregation sites focusing on specific topics or markets.
Card compared what's happening on the Web to what has happened on television. Major networks have been steadily losing market share to cable channels offering programming aimed at specific markets.
"The general-purpose, one-size-fits-all business eventually loses ground as the audience fragments, and different media companies arise to supply different services," he said.
Despite a year marked by consolidation in the industry, with media companies buying portals and portals buying portals, Card said the industry still has too many portals in the kitchen.
"There is room for a handful [of portals], but question is if there's room for six and all [can] be successful," Card said. "That's highly unlikely."